LIBRARY 


UNIVERSITY  OF  CALIFORNIA. 


GIFT    OF 


Class 


LIFE  INSURANCE 
TAXATION 

Address  of  HON.  GEO.  CURTIS,  JR., 


OF  THE 


WISCONSIN  TAX  COMMISSION 


General  Public  Hearing  on  Report  and  Bill 
of  Wisconsin  Tax  Commission  Relating  to 
the  Taxation  of  Life  Insurance  Companies, 
in  Assembly  Chamber,  Tuesday  Evening, 
March  21,  1911. 


P790 


Life  Insurance  Taxation. 


ADDRESS  OF  HON.  GEO.  CURTIS,  JR.,  A  MEMBER  OF 
THE  WISCONSIN  TAX  COMMISSION  AT  A  GENERAL 
PUBLIC  HEARING  ON  THE  REPORT  AND  BILL  OF 
THE  WISCONSIN  TAX  COMMISSION  RELATING  TO 
THE  TAXATION  OF  LIFE  INSURANCE  COMPANIES, 
DELIVERED  IN  THE  ASSEMBLY  CHAMBER,  MADI- 
SON, WISCONSIN,  TUESDAY  EVENING,  MARCH  21, 
1911. 


Bill  No.  836A  — 3388. 


Mr.  Chairman  iind  Gentlemen  of  the  Committee 
and  Members  of  the  Legislature: — My  appearance 
here  tonight  on  behalf  of  the  Tax  Commission  is 
pursuant  to  a  request  of  the  chairman  of  one  of  the 
committees  having  the  bill  in  charge. 

This  subject  was  considered  by  the  Legislature 
of  1899,  prior  to  the  organization  of  the  Tax  Com- 
mission. At  that  session,  after  extended  debate, 
radical  changes  were  made  in  the  law,  and  thereby 
the  amount  of  revenue  to  be  paid  annually  by  insur- 
ance companies  was  greatly  increased  over  the 
amount  required  under  the  law  which  had  there- 
tofore been  in  force,  without  change,  for  some  twen- 
ty years. 

1 

224660 


The  Act  of  1899,  known  as  the  Orton  law  (Chap- 
ter 326),  was  amended  by  Chapter  21,  Laws  of  1901. 
The  chief  purpose  of  such  amendment  was  to  re- 
lieve domestic  companies  (those  organized  under 
Wisconsin  laws)  from  the  effect  of  retaliatory  laws 
in  other  states  without  reducing  the  aggregate  rev- 
enue to  accrue  from  taxation  of  life  companies. 

This  legislation,  unchanged  since  1901,  was  tak- 
en to  be  a  legislative  declaration  of  a  settled  policy 
to  the  extent  that  the  Commission  deemed  it  a  duty 
to  defer  extended  study  of  the  subject  until  some  of 
the  many  other  tax  problems  requiring  considera- 
tion could  be  investigated.  Progress  in  all  investi- 
gation work  has  been  materially  retarded  by  the 
large  amount  of  administrative  duties  laid  upon 
the  Commission. 

The  life  companies  of  the  state  have  earnestly 
protested  that  the  present  law,  though  less  onerous 
than  the  Act  of  1899,  is  unjustly  burdensome.  Such 
protest  and  a  growing  doubt  of  the  justice  of  the 
present  law  presumably  induced  the  Legislature  of 
1909  to  adopt  a  joint  resolution  by  which  the  Com- 
mission is  requested  to  make  an  investigation  of 
the  subject  of  life  insurance  taxation  and  report 
thereon.  In  view  of  the  delay  in  the  completion  of 
the  Commission's  regular  biennial  report  for  1911, 
it  was  deemed  advisable  to  present  an  outline  of 
the  views  of  the  Commission  on  the  subject  in  a 
special  report  in  advance  of  the  compilation  of  the 
regular  report. 

Such  special  report  was  presented  to  the  Legis- 
lature February  10,  1911,  and  I  will  read  that  spe- 

2 


cial  report,  although  I  believe  it  has  been  printed. 
It  is  said  that  a  good  many  legislators  have  not 
found  time  to  peruse  it,  and  perhaps  its  reading 
at  this  time  will  therefore  be  justified.  The  special 
report  just  mentioned  is  as  follows : 

REPORT  OF  TAX  COMMISSION. 

To  the  Honorable,  the  Governor  and  the  Legislature 

of  the  State  of  Wisconsin : 

Pursuant  to  joint  resolution  No.  49  of  the  Legis- 
lature of  1909,  the  Tax  Commission  has  had  under 
consideration  the  subject  of  taxation  of  life  insur- 
ance companies  and  has  reached  conclusions  as  to 
the  amount  of  revenue  which  should  be  derived 
from  that  source  and  the  method  which  should  be 
employed  for  its  ascertainment  and  collection.  It 
is  expected  that  a  statement  of  the  grounds  upon 
which  such  conclusions  rest  will  appear  in  the 
regular  biennial  report  of  the  Commission;  but  it 
is  impracticable  to  present  in  this  communication 
more  than  an  outline  of  the  conclusions  reached. 
Such  outline  follows: 

1.  Accumulated  assets  held  by  life  insurance 
companies  in   trust    for   their   policyholders  may 
justly  be  made  a  source  of  revenue  to  the  state. 

2.  The  assets,   other  than   real   estate,   from 
which  contributions  to  such  revenue  may  be  re- 
quired should  be  limited  to  such  as  equitably  belong 
to  policyholders  resident  in  the  state. 

3.  So  far  as  such  assets  are  invested  in  real 
estate,  the  real  estate  should  be  taxed  in  the  dis- 
trict where  located  under  the  general  tax  laws  ap- 
plicable to  other  real  estate. 

4.  The  residue  of  such  assets,  consisting  mainly 
of  various  forms  of  credits,  and  other  interest  or 
dividend  bearing  securities,  in  view  of  the  purpose 
for  which  they  are  held  and  the  low  rate  of  income 
produced  therefrom,  should  not  be  taxed  at  the 
rates  usually  imposed  upon  property  or  capital  em- 

3 


ployed  in  productive  enterprises  carried  on  for  the 
pecuniary  profit  which  may  be  gained  therein. 

5.  The  amount  of  tax  to  be  imposed  upon  or 
on  account  of  such  assets  should  not  be  greater  than 
would  be  produced  by  a  moderate  income  tax  rate. 
Five  per  cent  of  the  income  from  such  assets  is  con- 
sidered a  reasonable  and  moderate  rate. 

6.  Such  amount  could  not  be  imposed  as  a  flat 
or  uniform  rate  upon  premium  receipts  without  pro- 
ducing great  inequality  of  tax  burden  as  between 
different  companies,  premium  receipts  having  no 
uniform  relation  to  assets  held  in  trust  for  policy- 
holders. 

7.  In  order  to  reach  and  tax  foreign  and  domes- 
tic companies  alike  the  tax  should  be  imposed  as 
an  excise  or  privilege  tax.     It  would  be  impractic- 
able and  inexpedient  to  impose  the  tax  directly  up- 
on policyholders  resident  in  the  state. 

Five  Per  Cent  Income  Tax. 

8.  A  tax  equal  to  5  per  cent  of  the  income  on 
assets  held  in  trust  for  Wisconsin  policyholders 
would  be  a  higher  tax  than  is  imposed  on  life  com- 
panies in  some  of  the  other  states.    The  imposition 
of  such  tax  on  foreign  companies  would  therefore 
subject   Wisconsin   companies   doing    business   in 
other  states  to  the  payment  of  large  amounts  to  such 
other  states,  under  the  so-called  reciprocal  or  retal- 
iatory laws  of  such  states,  in  excess  of  the  amounts 
which   Wisconsin  companies  would  otherwise  be 
obliged  to  pay  in  such  states. 

9.  The  amount  of  such  excess  which  Wisconsin 
companies  would  pay  in   1911   under  retaliatory 
laws  now  in  force  would  be  about  $174,000. 

10.  To  avoid  such  effect  upon  Wisconsin  com- 
panies it  would  be  necessary  to  reduce  the  Wiscon- 
sin taxes  upon  foreign  companies  to  amounts  not 
greater  than  would  be  required  of  such  companies 
according  to  the  laws  of  their  respective  states. 

11.  A  tax  upon  domestic  and  foreign  life  com- 


panies  now  doing  business  in  Wisconsin  equal  to 
5  per  cent  of  their  income  from  assets  (other  than 
real  estate)  equitably  belonging  to  their  Wisconsin 
policy  holders  would  produce  an  aggregate  revenue 
for  1910  of  about  f 87,000.  Such  aggregate  would 
increase  with  the  increase  of  such  assets. 

12.  If  the  companies  which  have  withdrawn 
from  Wisconsin  since  1907  should  resume  business 
in  this  state,  then  the  aggregate  revenue  for  1910 
from  the  tax  described  in  the  preceding  paragraph 
would  be  materially  larger. 

13.  A  reduction  of  the  proposed  tax  on  foreign 
companies  as  suggested  above  would  reduce  the 
total  revenue,  estimated  in  paragraph  11  at  $87,000, 
to  about  $75,000. 

Provisions  in  Proposed  Bill. 

14.  Such  reduction  if  made  would  be  a  mere 
expedient  to  save  Wisconsin  companies  from  puni- 
tive taxation  in  other  states  in  amounts  aggregating 
about  $174,000,  at  a  loss  to  the  revenue  of  the  state 
of  about  $12,000,  as  indicated  above.     Such  loss 
to  the  state  could  be  made  up  and  a  large  net  gain 
to  Wisconsin  companies  could  be  secured  by  grant- 
ing the  suggested  reduction  to  foreign  companies 
and  increasing  the  license  fees  for  Wisconsin  com- 
panies sufficiently  to  make  up  the  loss. 

15.  While  it  is  illogical  thus  to  place  Wiscon- 
sin companies  on  a  less  favorable  footing  than  for- 
eign companies,  it  seems  unavoidable  unless  the 
state  shall  elect  to  collect  less  revenue  from  life 
companies  than  it  ought  to  receive  according  to  the 
foregoing  conclusions. 

A  legislative  bill  has  been  drawn,  and  is  pre- 
sented herewith,  providing  for  the  taxation  of  life 
companies  upon  the  plan  and  at  the  rate  recom- 
mended above.  It  provides  for  the  suggested  re- 
ductions in  the  taxes  upon  foreign  companies.  If 
such  reductions  are  deemed  inadvisable  the  provi- 
sion therefor  can  be  stricken  out.  If  retained,  there 


should  also  be  provisions  increasing  the  license  fee 
for  Wisconsin  companies  sufficiently  to  cover  the 
loss  in  revenue  resulting  from  reduction  in  the  tax 
on  foreign  companies.  As  such  loss  would  or  might 
vary  from  year  to  year  with  changes  in  the  condi- 
tions producing  it,  it  is  considered  better  to  have 
the  exact  loss  computed  and  made  good  by  the  Wis- 
consin companies,  each  year,  than  to  provide  there- 
for by  an  inflexible  increased  license  fee  rate  on 
Wisconsin  companies.  The  provisions  just  sug- 
gested are  incorporated  in  the  accompanying  bill. 
They  place  the  work  of  making  the  required  compu- 
tations upon  the  Insurance  Commissioner,  whose 
office  contains  the  requisite  data.  He  is  given  au- 
thority to  call  for  such  further  data  as  may  be 
needful,  if  any. 

February  9,  1911. 

Respectfully  submitted, 

NORMAN  S.  GILSON, 
GEORGE  CURTIS,  JR., 
NILS  P.  HAUGEN, 

Commissioners. 


HISTORY  OF  WISCONSIN  LEGISLATION. 

As  preliminary  to  a  general  discussion  of  the 
subject,  a  brief  outline  of  the  legislation  in  this 
state  imposing  taxes  upon  life  companies  and  some- 
thing of  the  results  under  it  will  now  be  presented. 

The  first  act  for  the  regulation  and  taxation 
of  domestic  life  insurance  companies  in  this  state 
was  Chapter  158,  Laws  of  1867,  which  by  its  pro- 
visions included  "all  companies  transacting  the 
business  of  life  insurance  in  this  state  at  the  date 
of  the  passage  of  this  act,  whether  such  companies 
are  organized  under  special  charters  granted  for 


that  purpose  by  the  state  or  under  the  general  laws 
thereof." 

By  Section  5  of  the  act  each  insurance  company 
so  organized  was  required  to  pay  into  the  state 
treasury  1  per  cent  of  its  cash  receipts  for  the  year 
preceding  the  making  of  its  annual  report.  Section 
6  provided  that  such  payment  should  be  in  lieu  of 
all  taxes  for  any  purpose  authorized  by  the  laws  of 
the  state. 

Chapter  179,  Laws  of  1867,  was  an  act  to  regu- 
late and  tax  insurance  companies  not  incorporated 
by  the  state  of  Wisconsin.  By  this  act  a  sum  equal 
to  3  per  cent  of  the  gross  amount  received  in  the 
state  of  Wisconsin  for  premiums  and  interest  in 
each  year  was  required  to  be  paid  by  each  company 
as  an  annual  license  fee  for  the  privilege  of  trans- 
acting the  business  of  insurance  in  this  state.  The 
act  also  provided  that  when  application  for  a  license 
was  made  by  any  company  that  had  not  previously 
transacted  business  within  the  state  the  license  for 
the  first  year  should  be  $500. 

The  two  acts  above  mentioned  were  approved  on 
the  same  day  although  Chapter  179  was  published 
four  days  earlier  than  Chapter  158.  Thus,  at  prac- 
tically the  same  time,  the  Legislature  provided  for 
the  regulation  and  taxation  of  domestic  as  well  as 
foreign  insurance  companies  but  by  two  acts  in- 
stead of  one. 

The  foregoing  Laws  of  1867  were  repealed  by 
Chapter  59,  Laws  of  1870,  so  far  as  they  related  to 
life  insurance  companies  or  the  business  of  life  in- 
surance. 

7 


The  Act  of  1870  provided  for  the  regulation  and 
taxation  of  both  domestic  and  foreign  life  com- 
panies. 

Section  24  prescribed  the  following  fees  to  be 
paid  to  the  Secretary  of  State:  For  filing  the  an- 
nual statement  required  in  the  office  of  the  Secre- 
tary of  State,  twenty-five  dollars;  for  each  agent's 
certificate  of  authority,  one  dollar ;  for  every  copy 
of  paper  filed  in  the  Secretary  of  State's  office,  twen- 
ty-five cents  per  folio;  for  affixing  the  seal  of  said 
office  to  such  copy  and  certifying  the  same,  one  dol- 
lar ;  for  examining  the  affairs  of  any  company  when 
deemed  necessary,  the  expense  incurred  therein. 

Section  27  of  said  Chapter  59  prohibited  life 
insurance  companies  from  transacting  business  in 
the  state  without  first  obtaining  a  license  therefor, 
and  further  provided  that  no  such  license  should 
be  issued  to  any  such  company  until  it  had  filed 
in  the  office  of  the  Secretary  of  State  the  reports  and 
statements  required  in  such  act  and  made  payment 
to  the  State  Treasurer  in  addition  to  the  fees  above 
mentioned  an  annual  license  fee  of  |300,  and  fur- 
ther that  each  life  insurance  company  organized  in 
this  state  under  special  charter  or  under  general 
laws  should  pay  1  per  cent  on  the  cash  receipts  for 
premiums  received  by  such  company  in  Wisconsin 
for  the  year  preceding  the  making  of  its  annual  re- 
port. Such  license  fees  were  declared  to  be  in  lieu 
of  all  taxes  except  taxes  upon  real  estate. 

It  will  be  observed  that  the  law  of  1870  did 
not  require  foreign  insurance  companies  to  pay  li- 
cense fees  on  premium  receipts,  but  imposed  only 

8 


an  annual  license  fee  of  |300  in  addition  to  the  spe- 
cial charges  for  filing  papers,  examinations,  etc., 
imposed  upon  all  companies.  The  exemption  of 
foreign  companies  from  a  tax  on  premiums  was  no 
doubt  brought  about  by  the  retaliatory  laws  of  New 
York  and  two  or  three  other  eastern  states  having 
insurance  companies  domiciled  in  their  respective 
jurisdictions,  transacting  business  in  this  state. 

While  Chapter  158,  Laws  of  1867,  prescribed  a 
license  tax  of  1  per  cent  on  premium  receipts  of 
domestic  companies  in  the  state,  Chapter  179,  Laws 
of  1867,  imposed  upon  foreign  companies  trans- 
acting business  here  a  sum  equal  to  3  per  cent  upon 
the  gross  amount  received  in  the  state  of  Wiscon- 
sin from  premiums  and  interest  in  each  year.  The 
taxes  thus  imposed  upon  foreign  companies  was 
more  than  three  times  the  amount  required  from  the 
domestic  companies. 

The  first  retaliatory  law  enacted  in  New  York 
was  Chapter  694,  Laws  of  1865,  and  being  in  force 
when  Chapter  179,  Laws  of  1867,  was  enacted,  re- 
quired Wisconsin  companies  doing  business  in  New 
York  to  pay  the  same  tax  in  that  state  that  this  state 
imposed  upon  New  York  companies.  This  presum- 
ably contributed  to  the  repeal  of  Wisconsin's  gross- 
ly discriminatory  tax  on  foreign  companies. 

Chapter  256,  Laws  of  1878,  amended  Section  27 
of  Chapter  59,  Laws  of  1870,  by  increasing  the  tax 
on  premium  receipts  of  domestic  companies  in  the 
state  from  1  to  2  per  cent.  This  premium  tax  of 
2  per  cent  remained  in  force  until  the  passage  of 

9 


Chapter  326,  Laws  of  1899,  already  mentioned  as 
the  Orton  law. 

Under  said  Chapter  326  each  domestic  life  in- 
surance company  transacting  business  within  the 
state  was  required  to  pay  annually  1  per  cent  of 
its  gross  income  from  all  sources  except  income 
from  rents  of  real  estate  upon  which  it  paid  taxes 
in  the  same  manner  as  other  real  estate,  and  ex- 
cepting also  income  from  interest  on  United  States 
bonds.  Stated  more  explicitly,  this  license  fee  tax 
of  1  per  cent  was  to  be  computed  upon  the  entire 
premium  receipts  of  the  domestic  company  from  all 
its  policy  holders  wherever  resident  and  upon  the 
income  from  the  entire  ledger  assets  of  the  company, 
except  rents  from  real  estate  and  interest  on  United 
States  bonds. 

By  the  same  act  a  life  insurance  company  organ- 
ized without  the  state  of  Wisconsin,  transacting 
the  business  of  life  insurance  within  the  state,  was 
required  to  pay  an  annual  license  fee  of  1  per  cent 
upon  all  premiums  collected  and  premium  notes 
taken  or  received  by  it  from  residents  of  this  state. 
In  all  cases  the  entire  premium  paid  to  the  com- 
pany, whether  in  cash  or  in  premium  notes,  was  to 
be  deemed  income,  without  any  deduction  there- 
from on  account  of  dividends  paid  or  credited  to 
the  insured. 

Under  this  act  The  Northwestern  Mutual  Life 
Insurance  Company,  the  principal  domestic  com- 
pany transacting  the  business  of  life  insurance  in 
the  state,  paid  to  the  state  in  taxes  the  sum  of  f  186,- 
396  in  1899  instead  of  f 33,357,  the  latter  figure 

10 


being  the  amount  of  the  license  fee  of  2  per  cent  on 
premium  receipts  imposed  by  the  law  of  1878.  In 
1900  the  tax  of  1  per  cent  on  the  gross  income  of 
this  company  in  1899  amounted  to  $241,636. 

This  act  of  1899  also  brought  into  operation  the 
retaliatory  laws  of  at  least  four  states  and  in  1900 
the  Northwestern  Company  paid  retaliatory  taxes 
on  account  of  the  income  of  1899  as  follows : 

To  New  York $25,220.20 

To  Illinois 17,694.63 

To  Connecticut 3,877.45 

To  New  Jersey 3,560.51 


Total $50,352.79 

The  license  fees  from  life  insurance  companies 
of  those  states  transacting  business  in  Wisconsin, 
paid  to  this  state,  for  the  corresponding  period  are 
as  follows: 

New  York $19,684.51 

Illinois   8.52 

Connecticut 4,144.03 

New  Jersey 3,770.88 


Total $27,607.94 

Chapter  21,  Laws  of  1901,  amended  Chapter  326, 
Laws  of  1899,  so  as  to  require  domestic  companies 
to  pay  an  annual  license  fee  of  3  per  cent  of  their 
gross  income  from  all  sources,  excepting  income 
from  rents  of  real  estate  and  also  excepting  pre- 
miums collected  outside  the  state  of  Wisconsin  on 
policies  held  by  non-residents  of  Wisconsin.  In 
ascertaining  the  amount  of  premium  receipts  as  the 
basis  for  computing  such  license  fee,  no  deduction 

11 


is  allowed  on  account  of  dividends  paid  or  credited 
to  the  insured. 

By  the  same  act  foreign  companies  transacting 
the  business  of  life  insurance  in  the  state  are  re- 
quired to  pay  an  annual  license  fee  of  f 300,  except 
that  whenever  the  taxes  and  fees  imposed  upon  a 
company  of  another  state  under  the  retaliatory 
laws  of  this  state  (Section  1221,  Statutes  of  1898) 
shall  exceed  $300,  the  amount  of  the  annual  license 
fee,  such  license  fee  shall  be  deducted.  This  pro- 
vision relieves  domestic  companies  from  the  opera- 
tion of  the  retaliatory  laws  of  other  states. 

The  amount  of  revenue  accruing  from  the  license 
fees  imposed  upon  domestic  companies  by  Chapter 
21,  Laws  of  1901,  was  slightly,  more  than  the 
amount  secured  under  Chapter  326,  Laws  of  1899. 
The  purpose  of  the  act  was  to  produce  about  the 
same  amount  of  revenue  to  the  state  from  life  in- 
surance taxation  and  to  relieve  domestic  companies 
from  retaliatory  taxes  in  other  states. 

The  license  fees  paid  by  The  Northwestern  Mu- 
tual Life  Insurance  Company,  on  premium  receipts 
in  the  state,  from  1868  to  1898,  a  period  of  thirty- 
one  years,  amounted  in  the  aggregate  to  $342,637.65. 
The  license  fees  paid  by  that  company  under  the 
acts  of  1899  and  1901  are  as  follows,  by  years : 

1899 $  186,386.54 

1900 241,636.16 

1901 243.185.27 

1902 253,171.01 

1903 261.517.12 

1904 276,815.86 

1905 308,566.62 

12 


1906 331,964.83 

1907 358,980.48 

1908 365,303.61 

1909 403,238.68 

1910 433,755.45 

1911 450,704.78 


Total,  13  years.  .|4,115,226.41 

SHALL  ANY  TAX  BE  IMPOSED? 

In  dealing  with  the  vital  questions  entering 
into  the  problem  of  life  insurance  taxation,  the  in- 
vestigator is  confronted  with  the  proposition  often 
urged  on  behalf  of  life  companies  that,  aside  from 
the  capital  of  stock  companies,  they  should  not  be 
taxed  at  all  except  in  respect  to  real  estate  owned 
and  such  exactions  as  may  be  necessary  to  defray 
the  public  expense  of  official  inspection  and  regu- 
lation through  a  state  insurance  department  or 
otherwise. 

It  is  represented  in  support  of  this  contention 
that  life  insurance  is  a  beneficent  thing  and  should 
be  encouraged  and  fostered  by  exemption  instead 
of  being  burdened  with  a  tax;  that  the  assets  of 
such  companies  held  in  trust  for  policy  holders  are 
accumulated  savings  the  taxation  of  which  would 
be  a  burden  upon  and  a  discouragement  of  provi- 
dence and  thrift;  that  such  assets,  other  than  real 
estate,  consist  mainly  of  interest  or  dividend 
bearing  securities  which  are  merely  representative 
of  interests  in  tangible  property  usually  fully  taxed 
in  the  jurisdiction  where  located,  and  to  tax  both 
would  be  double  taxation  in  economic  effect. 

13 


These  arguments  are  not  without  merit  and  are 
deemed  a  sufficient  answer  to  the  proposal  to  impose 
anything  more  than  a  very  moderate  tax. 

It  must  be  borne  in  mind,  however,  that  a  very 
large  part  of  the  taxes  collected  in  the  various 
states,  beyond  that  placed  upon  the  "socially  made 
value"  of  land,  is  imposed  primarily  upon  savings 
of  some  sort  or  the  product  of  industry  and  thrift, 
and  must  continue  to  be  so  placed  until  the  entire 
scheme  is  radically  changed. 

Frugality,  thrift  and  industry  are  indispensable 
to  economic  progress,  but  it  is  mainly  by  the  exer- 
cise of  these  virtues  that  people  come  to  have  ability 
to  contribute  to  public  revenues.  Of  necessity  such 
revenues  must  come  from  those  who  possess  such 
ability.  All  institutions  for  encouragement  of 
thrift,  for  protection  and  safe  investment  of  savings, 
are  in  some  degree  beneficent;  but  it  is  not  perceived 
that  the  institution  of  life  insurance  is  so  far  dif- 
ferent from  others  in  this  respect  as  to  warrant  its 
total  exemption. 

On  this  point  the  late  Dr.  Zartman,  of  Yale, 
says  : 

"All  capital  is  a  provision  for  the  future,  and 
in  attempting  to  differentiate  insurance  savings 
from  other  savings  the  opponents  of  (insurance) 
taxation  have  failed  to  establish  their  point."* 

In  a  very  recent  address  Prof.  T.  S.  Adams  says : 

"It  is  perfectly  true  that  a  tax  on  insurance 
paid  by  the  policyholder  tends  to  discourage  thrift. 
But  that  is  not  in  itself  sufficient  reason  for  abolish- 


*Investments  of  Life  Ins.  Companies,  p.  220;   H.  Holt  & 
Co.,  1906. 

14 


ing  such  taxes.  In  the  first  place,  our  tax  system 
similarly  discourages  thrift  at  many  points ;  savings 
banks  are  taxed  in  most  states ;  and  the  small  home- 
steads in  which  wage-earners  and  salaried  clerks 
invest  their  savings  are  more  heavily  taxed,  in  all 
probability,  than  any  other  class  of  property  except 
the  estates  of  widows  and  orphaned  children  in  the 
process  of  administration  and  settlement.  In  fact, 
our  whole  system  of  state  taxation,  falling  princi- 
pally on  realized  or  accumulated  wealth,  is  a  huge 
engine  for  the  taxation  of  savings  and  capital — the 
two  principal  means  by  which  thrifty  people  provide 
against  future  emergencies.  Insurance  is  merely  a 
method  of  co-operative  saving  with  an  ingenious 
provision  that  if  any  co-operator  is  prevented  by 
death  from  continuing  his  savings,  the  more  for- 
tunate survivors  shall  do  a  stipulated  amount  of 
saving  for  him. 

"Furthermore,  this  system  of  taxing  savings  and 
accumulated  wealth  has  been  deliberately  adopted 
and  will  not  be  abandoned.  The  civilized  nations  of 
the  world  have  committed  themselves  to  the  general 
policy  of  levying  taxes,  so  far  as  possible,  in  propor- 
tion to  ability,  not  disability ;  according  to  strength, 
not  weakness;  and  as  the  thrifty  man  is  usually 
the  able  and  the  strong  man,  he  will  continue  to 
pay  most  of  the  taxes.  One  of  the  incidental  dis- 
advantages of  this  ability  principle  is  the  fact  that 
it  does  to  a  degree  tend  to  discourage  thrift.  But 
you  cannot  build  a  tax  system  on  incidentals.  The 
proposal  to  build  a  system  of  taxation  on  sumptuary 
principles — penalizing  waste  and  thriftlessness,  re- 
warding thrift  and  industry — has  been  repeatedly 
made  in  the  past  and  deliberately  rejected.  It  is 
impracticable,  for  one  thing,  because  the  more  it 
succeeds,  the  less  revenue  it  yields."* 


*  Adams,  Address  at  Fourth  Annual  Meeting  of  Life  Ins. 
Presidents,  1910,  p.  62;  Zartman,  Investments  of  Life  Ins. 
Cos.,  pp.  221-224. 

15 


DOUBLE  TAXATION. 

The  double  taxation  argument  is  entitled  to 
thoughtful  consideration.  It  and  the  contra  argu- 
ment are  so  nearly  balanced  that  the  two  economists 
just  cited  reach  apparently  opposite  conclusions,  as 
to  whether  assets  held  in  trust  for  policy  holders 
should  or  should  not  be  taxed. 

In  Professor  Adams'  argument,  mainly  pre- 
sented, in  form,  as  that  of  an  impersonal  doubter, 
he  declares  that  "double  taxation  is  not  necessarily, 
but  is  actually — as  practiced  in  this  country — an 
abomination ;"  that  "the  proposal  to  exempt  credits 
is  largely  but  not  wholly  sound,  and  its  unsound 
point  leaves  room  for  some  taxation  of  the  policy- 
holders  of  insurance  companies  by  the  several  states 
in  which  they  reside." 

This  conclusion  seems  to  be  reached  mainly  upon 
two  considerations :  ( 1 )  That  in  most  of  the  states 
credits  are  still  legally  taxable  and  some  amount 
of  tax,  though  relatively  small,  is  actually  collected 
therefrom,  and  that  credits  held  as  life  insurance 
assets  are  not  entitled  to  exemption  if  other  credits 
are  to  remain  taxable.  (2)  That  "there  is  a  prac- 
tical and  a  theoretical  flaw  in  the  demand  for  credit 
exemption.  People  owe  some  obligation  to  pay 
taxes  at  the  place  where  they  reside."  The  latter 
consideration  seems  to  have  much  greater  weight 
with  Professor  Adams  than  the  former.  He  says : 
"Here's  John  Smith,  who  lives  in  Indiana  and  has 
all  his  money  invested  in  a  street  railway  in  Illinois. 
The  defendants  of  credit  exemption  would  give 

16 


Illinois  all  the  tax  and  Indiana  none.  They  say 
to  Indiana:  'Remit  all  taxes  on  John  Smith  be- 
cause the  only  property  he  owns  in  Indiana  is  a 
paper  evidence  of  ownership  of  property  situated 
wholly  in  Illinois,  where  it  is  fully  taxed.'  This 
advice  is  at  best  a  counsel  of  perfection.  Indiana 
never  will  resign  her  claim,  and  really  ought  not 
resign  all  her  claim." 

There  is  no  disposition  to  belittle  this  argument ; 
indeed,  it  is  proposed  to  adopt  all  there  is  in  it  of 
merit.  But  it  must  be  conceded  that  it  loses  some 
of  its  force  when  due  consideration  is  given  to  the 
fact  that  the  case  of  the  individual  resident  in  one 
district  having  his  tangible  property  in  another  is 
offset  to  some  extent  by  the  cases  of  tangible  prop- 
erty in  his  district  held  by  residents  of  others.  The 
multiplicity  of  such  offsetting  cases  goes  far  toward 
establishing  an  economic  equilibrium  between  tax- 
ing jurisdictions  and  modifies  to  some  extent  the 
seeming  injustice  of  the  single  case  so  strongly 
put  by  Professor  Adams. 

But  perfect  equilibrium  is  not  secured.  The 
holders  of  credits  and  other  "paper  evidences"  of 
rights  in  tangible  property  located  elsewhere  reside 
in  greater  numbers  in  urban  than  in  rural  com- 
munities ;  in  the  former  there  is  less  value  of  tangi- 
ble property  in  proportion  to  revenue  necessities 
than  in  the  latter,  and  herein  is  found  seeming 
justification  for  some  tax  upon  the  holder  of  credits 
in  the  community  in  which  he  resides,  notwith- 
standing the  full  taxation  of  the  tangible  property 
represented  by  such  credits. 

17 


Of  perhaps  greater  importance  is  the  fact  that, 
in  the  growing  complexity  of  society,  its  higher 
standards  of  living,  and  of  service  through  public 
agencies,  with  its  corresponding  increase  in  public 
expenditures,  the  increasing  burden  of  taxation 
becomes  less  and  less  equitably  distributed  by  the 
crude  plan  of  the  general  property  tax,  whereby, 
in  theory,  tax  burdens  are  apportioned  by  uniform 
rates  according  to  the  capital  value  of  every  kind 
of  property,  including  that  which,  according  to 
some  views,  is  property  merely  by  legal  fiction. 

Neither  in  theory  nor  in  practical  administra- 
tion does  it  accomplish  the  highest  degree  of 
equality.  In  theory  it  fails  to  accomplish  that 
equality  of  sacrifice  which  differentiates  between 
the  individual  of  small  means  and  the  one  of  large, 
and  in  practical  administration  it  usually  fails  to 
secure  in  the  assessment  of  the  larger  and  more  com- 
plex properties  a  valuation  relatively  equal  to  that 
placed  on  the  smaller,  simpler  ones.  It  assumes, 
too,  an  economic  untruth,  that  all  kinds  of  prop- 
erty will  bear  the  same  degree  of  tax  burden, 
measured  by  capital  value. 

The  constantly  increasing  burden  of  taxation 
tends  to  accentuate  such  inequalities  and  to  in- 
tensify the  demand  for  some  measure  of  relief — 
some  plan  whereby  a  portion  of  the  burden  will 
be  placed  on  those  better  able  to  bear  it  than  those 
who  suffer  greatest  from  the  regressive  workings 
of  the  general  property  tax. 

It  is  upon  these  imperfectly  outlined  considera- 
tions that  justification  is  found  for  taxation  of 

18 


inheritances  and  also  taxes  upon  incomes  beyond 
a  reasonable  minimum  of  subsistence.  To  the 
extent  that  such  taxes  may  be  reasonably  imposed 
they  may  be  justly  placed  upon  credits  or  the  in- 
come therefrom  notwithstanding  the  taxation  also 
of  the  actual  property  represented  by  such  credits.* 

SHALL  REAL  ESTATE  BE  TAXED? 

There  is  general  agreement  that  real  estate 
owned  by  life  insurance  companies  should  be  taxed 
in  the  district  where  located  in  the  same  manner 
and  for  the  same  purposes  that  other  real  estate 
in  the  same  district  is  taxed.  Ownership  of  real 
estate  is  not  essential  to  the  business  of  such  com- 
panies. When  they  become  such  owners,  the  use  to 
which  the  real  estate  is  devoted  does  not  differ  in 
character  from  the  use  of  other  real  estate  in  the 
same  district  so  as  to  warrant  any  different  treat- 
ment for  purposes  of  taxation. 


*In  a  former  report  of  the  Tax  Commission  the  taxation 
of  credits  was  discussed  at  some  length  and  the  position  then 
taken,  rather  broadly,  was  that  such  taxation  was  not  only 
inexpedient  but  unsound  in  theory  and  tended  to  inequality 
of  burden  as  between  debtors  and  their  creditors  treated  as 
one  class  and  non-indebted  property  owners  as  another  class 
— one  member  of  the  Commission  dissenting.  It  should  be 
borne  in  mind  that  that  discussion  was  directed  primarily 
to  the  question  of  retaining  or  discarding  that  feature  of 
Wisconsin's  general  property  tax  which  required  credits 
to  be  taxed  upon  a  valuation  basis  at  the  rates  imposed  upon 
property  generally.  To  that  question  the  same  answer  would 
now  be  returned  that  was  then  given  by  those  who  declared 
the  view  just  stated.  The  proposal  of  a  low  tax  on  credits 
as  compared  with  general  property  was  not  then  considered, 
or  not  as  fully  as  it  should  have  been,  and  some  of  the 
grounds  now  offered  in  justification  of  such  low  tax  were 
not  then  suggested.  At  that  time  an  income  tax  seemed 
far  away,  if  not  an  impossibility,  and  the  constitution  for- 
bade the  taxation  of  credits  as  property  at  any  lower  rate 
than  that  imposed  on  other  property. 

19 


In  its  use  it  is  in  practical  competition  with 
all  other  real  estate  and  presumably  is  equally 
remunerative  to  its  owners.  The  great  bulk  of 
local  tax  burdens  now  rests  upon  real  estate  and 
must  continue  to  do  so  for  years  to  come.  These 
burdens  are  heavy  in  most  jurisdictions  and  no 
part  should  be  exempted,  wholly  or  partially,  un- 
less clear  and  strong  reasons  demand  it.  Such 
reasons  do  not  appear  in  respect  to  the  real  estate 
acquired  by  life  companies. 

In  prescribing  special  methods  for  taxation  of 
various  financial  institutions  and  some  other  special 
interests,  legislatures  generally  require  the  real 
estate  owned  by  them  to  be  taxed  as  other  real 
estate.  There  seems  to  be  no  good  reason  why  an 
exception  should  be  made  in  respect  to  realty  held 
by  life  companies. 

AS  TO  TAXATION  OF  OTHER  ASSETS. 

While  the  state  is  not  restricted  in  any  legal 
sense  to  the  assets  of  life  insurance  companies  as 
the  basis  or  justification  for  their  taxation,  it  has 
been  the  purpose  of  some  of  the  foregoing  discus- 
sion to  indicate  that  the  existence  of  such  assets 
constitutes  the  chief  ground  upon  which  the  right 
to  secure  general  revenue  from  such  companies  can 
be  maintained. 

The  ability  of  each  company  to  contribute  to 
the  public  revenue  rests  upon  such  assets  or  the 
income  it  receives  therefrom,  and  the  amount  to 
be  required  from  each  should  be  measured  accord- 

20 


ing  to  such  ability  rather  than  by  a  more  arbitrary 
standard. 

This  suggests  at  once  the  question  whether  the 
state  shall  impose  taxes  upon  or  with  reference  to 
all  such  assets  as  are  held  by  its  home  companies 
and  also  subject  foreign  companies  doing  business 
here  to  such  taxation  as  may  be  found  expedient, 
or  shall  it  measure  its  exaction  of  both  domestic 
and  foreign  companies,  as  near  as  may  be,  by  the 
amount  of  such  assets  equitably  belonging  to  resi- 
dents of  this  state? 

The  power  of  the  state  to  pursue  the  former 
course  is  undoubted,  for  in  legal  contemplation 
the  company  is  the  owner  of  such  assets,  and  such 
as  consist  of  credits  or  other  intangible  securities 
have  a  legal  situs  for  purposes  of  taxation  in  the 
jurisdiction  in  which  the  corporation  has  its  loca- 
tion or  legal  domicile. 

But  such  assets,  aside  from  the  portion  repre- 
senting the  capital  of  stock  companies,  are  virtually 
held  in  trust  for  the  policyholders  and  equitably 
belong  to  them,  and  these  policyholders,  especially 
those  of  the  larger  companies,  reside  in  all  parts 
of  the  country. 

It  is  true  that  under  the  general  property  tax 
laws  of  the  state,  similar  in  this  respect  to  the 
laws  of  other  states,  property  belonging  to  trust 
estates  is  usually  taxed  to  the  trustee,  be  he  guar- 
dian, executor  or  what  not,  precisely  as  if  he  were 
the  absolute  owner,  and  such  of  it  as  has  its  legal 
situs  at  the  domicile  of  the  owner  is  taxed  to  such 
trustee  in  the  jurisdiction  in  which  he  resides  with- 

21 


out  regard  to  the  place  of  residence  of  the  persons 
for  whose  benefit  the  trustee  holds  it. 

This  does  not  produce  important  inequalities 
between  different  taxing  jurisdictions  as  applied 
to  cases  of  relatively  small  estates,  for  they  are 
sufficiently  numerous  in  the  course  of  years  to 
offset  one  another  so  as  to  produce  an  approximate 
equilibrium.  But  the  large  accumulations  of  life 
insurance  assets,  consisting  mainly  of  forms  of 
property,  which  can  hardly  have  a  situs  except  at 
the  domicile  of  the  company,  present  a  case  which 
is  exceptional,  one  calling  for  different  treatment. 

As  the  tax  on  or  on  account  of  such  assets  falls 
ultimately  upon  the  policy  holders,  simple  justice 
seems  to  demand  that  each  taxing  jurisdiction,  at 
least  each  state  jurisdiction,  should  have  such  pro- 
portion of  the  total  tax  revenue  as  is  borne,  theoret- 
ically at  least,  by  policyholders  resident  therein, 
and  no  more.  Each  state  can  secure,  and  in  most 
instances  does  secure,  that  much  from  every  foreign 
company  doing  business  within  its  borders,  and  no 
satisfactory  reason  exists,  it  is  believed,  why  any 
state  should  exact  more  from  its  home  companies. 

Few,  if  any,  of  the  several  American  states  will 
relinquish  the  right  to  tax  foreign  companies,  and 
such  taxes  when  imposed  will  be  somewhat  in  pro- 
portion to  the  assets  of  such  companies  equitably 
belonging  to  policyholders  resident  in  the  state 
which  makes  the  exaction. 

If  each  state  also  taxes  to  the  full  all  the  assets 
of  its  home  companies  there  will  clearly  be  double 
taxation  in  one  of  its  abominable  forms. 

99 


On  this  point,  in  an  addess  delivered  in  1908 
before  the  annual  meeting  of  life  insurance  presi- 
dents, Professor  Zartman  said  in  part : 

"The  state  in  which  a  company  is  located  does 
not  have  the  moral  right  to  levy  a  general  property 
tax  upon  all  the  assets  of  such  companies  as  happen 
to  have  their  home  offices  in  that  state.  No  success- 
ful insurance  company  has  gathered  its  assets,  even 
for  the  most  part,  from  the  savings  of  citizens 
within  the  state  where  it  is  located.  Its  assets  are 
the  result  of  premiums  that  it  has  collected  from 
very  part  of  the  country.  These  assets  belong  in 
large  part  to  citizens  of  other  states. 
Whatever  rights  the  state  may  have  in  regard  to 
the  share  of  the  assets  belonging  to  its  own  citizens, 
it  does  not  have  the  same  right  over  assets  belonging 
to  citizens  of  other  states." 

WHAT  SHOULD  BE  THE  TAX  RATE? 

This  is  at  once  the  most  important  and  the  most 
difficult  feature  of  the  problem.  Upon  the  rate 
mainly  depends  the  justice  of  the  tax  and  the 
amount  of  revenue  which  the  state  may  properly 
exact  from  life  companies. 

By  what  test  or  standard  shall  the  rate  be 
ascertained? 

On  this  question  very  little  help  is  obtainable 
from  the  legislation  of  the  past.  On  no  subject 
in  the  whole  domain  of  taxation  does  there  appear 
a  wider  variation  in  method  of  treatment  or  weight 
of  burden  than  in  the  life  insurance  tax  laws  of 
civilized  states — the  tax  ranging  from  a  nominal 
tax  or  none  at  all  to  one  "as  great  as  the  traffic 
will  bear,"  or  greater;  and  in  published  discussion 

23 


of  the  subject  there  seems  to  be,  so  far  as  noted, 
very  little  to  serve  as  a  guide. 

At  the  fourth  annual  conference  of  the  Inter- 
national Tax  Association  there  was  submitted  the 
report  of  a  committee  previously  appointed  "to  in- 
vestigate the  question  of  life  insurance  taxation." 

The  report  was  signed  by  Lawson  Purdy,  one 
of  the  ablest  tax  administrators  and  tax  students 
in  the  country,  president  of  the  department  of  taxes 
and  assessments,  New  York  City ;  George  H.  Noyes, 
general  counsel  of  The  Northwestern  Mutual  Life 
Insurance  Company,  and  W.  H.  Daniels,  professor 
of  political  economy,  Princeton  University. 

In  reading  the  following  excerpts  from  that 
report  it  should  be  borne  in  mind  that  the  reso- 
lution under  which  the  committee  was  appointed 
in  effect  required  consideration  to  be  given  to  the 
matter  of  uniformity  in  insurance  tax  laws  as  well 
as  the  general  subject  of  taxation  of  life  companies. 
In  its  effort  to  find  a  basis  for  uniformity  the  com- 
mittee was  presumably  influenced  by  the  prevailing 
practice  in  this  country  of  basing  the  tax  upon 
premium  receipts. 

Extracts  From  Report  of  Committee  of  Interna- 
tional Tax  Conference. 

It  is  not  the  purpose  of  this  committee  to  dis- 
cuss fundamental  principles,  but  to  confine  con- 
sideration to  the  relationship  between  taxation  and 
life  insurance. 

Your  committee  is  of  the  opinion  that  life 
insurance  companies  should  contribute  the  expenses 
incident  to  their  supervision  by  the  state. 


Your  committee  has  carefully  considered  many 
good  reasons  why  life  insurance  should  be  exempt 
from  taxation  entirely  except  on  the  real  estate 
owned  by  the  insurance  companies,  especially  be- 
cause life  insurance  enjoys  no  special  privilege  and 
is  primarily  a  means  of  co-operating  to  distribute 
the  cost  of  providing  for  dependent  widows  and 
children,  and  secondarily  of  saving  a  fund  for  old 
age.  Nevertheless,  the  committee  believes  that  the 
states  will  for  the  present  demand  considerable 
revenue  from  life  insurance  companies.  Owing  to 
the  varied  character  of  their  business,  there  can 
be  no  one  theoretically  correct  method  of  taxing 
them,  but  a  common  ground  should  be  found  upon 
which  both  the  state  and  insurance  companies  can 
harmoniously  stand. 

***** 

Life  insurance  companies  occupy  a  unique  posi- 
tion in  the  business  world.  While  properly  classi- 
fied as  private  corporations,  they  are  not  among 
the  productive  or  industrial  corporations,  nor,  with 
a  few  exceptions,  those  organized  for  profit.  They 
act  merely  as  receivers,  investors  and  distributors 
of  funds  placed  in  their  hands  for  administration. 
Their  assets,  which  consist  mainly  of  credits,  are 
held  solely  to  pay  policyholders,  and  their  con- 
tracts of  insurance  are  not  instrumentalities  of 
commerce.  In  their  connection  with  the  state  they 
are  subject  to  more  supervision  than  individuals  and 
less  than  public  service  corporations.  They  may 
naturally  be  placed  in  a  separate  and  distinct  class, 
and  are  entitled  to  a  method  of  taxation  adapted  to 

the  character  and  extent  of  their  operations. 

*  *  *  *  * 

Your  committee  has  considered  many  theories 
in  connection  with  the  subject,  including  plans  for 
the  taxation  of  income,  reserve,  assets,  surplus,  and 
so-called  "investment  features,"  but  finds  them  all 
more  or  less  subject  to  grave  objections. 

It  thinks  the  most  convenient  and  practicable 

25 


tax  for  the  present  is  in  the  nature  of  a  license  fee 
for  the  privilege  of  doing  business. 

A  reasonable  tax  would  be  one  just  sufficient 
to  cover  the  necessary  cost  of  supervision,  but  your 
committee  reluctantly  yields  to  the  practical  de- 
mands of  the  state  that  life  insurance  companies 
should  contribute  a  larger  amount  to  its  revenue. 

Life  insurance  companies  operate  in  the  several 
states  of  the  Union  by  courtesy,  since  they  are  not 
engaged  in  interstate  commerce.  They  contribute 
to  the  revenue  according  to  legislative  enactments, 
the  amount  of  their  contribution  being  measured 
by  the  amount  of  business  done  with  the  policy- 
holders  in  each  state.  This  amount  is  represented 
by  annual  domestic  premium  receipts. 

That  this  plan  has  met  with  favor  is  shown  by 
the  fact  that  of  all  states  of  the  Union  taxing 
domestic  life  insurance  companies  (twelve  practi- 
cally do  not  tax  them  at  all),  twenty-seven  base 
their  license  fee  or  "tax"  on  a  percentage  of  do- 
mestic premium  receipts,  while  forty-one  adopt  the 
domestic  premium  receipt  basis  in  "taxing-'  for- 
eign life  insurance  companies  operating  within 
their  borders. 

Your  committee  approves  of  this  prevailing 
method  as  the  most  convenient  means  now  prac- 
ticable for  the  adjustment  of  existing  tax  inequali- 
ties and  discriminations. 

***** 

It  must  be  admitted  that  there  is  no  one  sci- 
entific system  of  taxing  life  insurance  companies; 
whatever  is  adopted  must  be  simple  and  easy  and 
certain  of  calculation.  The  legislative  mind  must 
not  be  confused  by  technical  side  issues. 

A  license  fee  or  tax  measured  by  premium  re- 
ceipts received  in  the  state  meets  this  desired  re- 
quirement and  bases  the  contributions  of  life 
insurance  companies  to  governmental  support  on 
the  amount  of  business  transacted  with  policy- 
holders  in  the  several  taxing  jurisdictions. 

26 


Concerning  the  rate  your  committee  is  of  the 
opinion  that  the  imposition  of  a  tax  of  1  per 
centum  of  domestic  premium  receipts  upon  all  com- 
panies engaged  in  the  business  of  life  insurance 
would  result  in  substantial  and  sufficient  revenue 
to  the  several  states  and  be  an  ample  requirement 
from  the  companies. 

The  fee  should  be  uniform,  and  apply  alike  to 
domestic  and  foreign  companies. 

Under  existing  laws  the  basis  of  domestic  pre- 
mium receipts  is  generally  recognized,  but  the  rates 
vary  materially,  resulting  in  manifest  discrimina- 
tion and  injustice,  and  provoking  retaliation. 

The  revenue  thus  paid  by  way  of  license  fee 
should  be  in  lieu  of  all  charges  for  supervision  and 
all  taxes  except  those  locally  levied  on  real  estate. 

Resolutions  Adopted  by  Conference. 

After  receiving  the  foregoing  report  the  Confer- 
ence adopted  the  following  preamble  and  resolu- 
tions : 

Whereas,  A  tax  measured  by  domestic  premium 
receipts  of  companies  engaged  in  the  business  of 
insuring  lives  in  the  several  states  is  easily  and 
accurately  calculated,  and  accords  with  the  amount 
of  business  transacted  with  the  policyholders  in  the 
several  states;  therefore,  be  it 

Resolved,  That  it  is  the  sense  of  the  Conference 
that  a  uniform  method  of  taxing  the  domestic  pre- 
mium receipts  of  all  companies,  foreign  and  do- 
mestic, engaged  in  the  business  of  insuring  lives 
should  be  adopted  in  the  several  states  of  the  Union. 

Resolved,  That  the  Conference  make  no  recom- 
mendation as  to  the  amount  of  the  rate. 

Thus,  in  the  latest  deliberations  on  the  subject, 
the  rate,  the  vital  thing,  is  left  "in  the  air,"  while 
in  connection  with  the  committee's  suggestion  of 
the  rate  of  1  per  cent  on  domestic  premium  receipts 

27 


little  is  found  to  serve  as  a  reason  why  that  rate  is 
selected  rather  than  one  higher  or  lower. 

From  general  knowledge  of  prevailing  rates  it 
may  be  seen  that  the  adoption  of  the  proposed 
1  per  cent  rate  would  render  the  retaliatory  laws 
of  some  other  states  inoperative,  but  this  could  not 
be  accomplished  in  all  states  without  removing  all 
taxes  upon  foreign  companies. 

It  will  be  noted  that  the  members  of  the  com- 
mittee just  mentioned  are  inclined  to  the  view  that 
life  companies  should  be  taxed,  except  in  respect  to 
real  estate,  only  enough  to  defray  the  state's  ex- 
pense for  supervision  and  regulation,  and  that  the 
tax  itself  should  be  by  way  of  compensation  for  the 
privilege  of  conducting  life  insurance  business, 
though  the  committee  "reluctantly  yields  to  the 
practical  demands  of  the  state"  for  a  larger  revenue. 

But  as  already  indicated,  the  Commission  vir- 
tually rejects  this  view  in  reaching  its  conclusion 
that  life  companies  may  legitimately  be  required 
to  make  reasonable  contributions  to  general  public 
revenues. 

It  does  not  adopt  the  commonly  entertained 
idea  that  tax  contributions  are  merely  payments 
by  the  citizen  for  privileges,  protection  and  other 
benefits  conferred  by  government,  but  takes  the 
broader  ground  that  revenue  is  an  absolute  necessity 
of  government,  and  must  be  obtained,  not  in  pro- 
portion to  benefits  received,  but  in  proportion  to  the 
ability  of  citizens  to  pay.  Consequently  the  Com- 
mission is  not  aided  in  its  effort  to  discover  the 
proper  tax  rate  to  be  imposed,  or  the  amount  of 

28 


revenue  the  state  may  justly  demand,  by  any  study 
of  the  value  of  the  privilege  of  conducting  the  busi- 
ness of  life  insurance,  or  of  the  expense  incurred  by 
the  public  for  supervision  and  regulation  of  such 
companies. 

Nor  is  the  Commission  able  to  get  much  working 
knowledge  of  taxpaying  ability  from  the  premium 
receipts  of  the  various  companies.  If  such  receipts 
were  a  serviceable  index  of  ability,  the  assessment 
companies  and  fraternals  would  be  found  to  possess 
ability  hitherto  unsuspected,  and  the  companies 
writing  "industrial"  policies  and  those  whose  poli- 
cies are  largely  recent  contracts  would  be  classed 
as  possessing  ability  of  equal  degree  with  those 
whose  policies  are  largely  paid  up  or  well  advanced 
toward  maturity  and  have  great  reserve  accumu- 
lations behind  them. 

Hence  the  conclusion  that  ability  must  be  de- 
termined by  the  accumulated  assets  of  the  com- 
panies and  that  the  rate  must  be  determined  largely 
with  reference  to  what  such  assets  can  reasonably 
and  justly  bear,  having  reference  so  far  as  prac- 
ticable to  experience  with  similar  assets  otherwise 
employed  in  other  enterprises. 

As  already  observed,  the  assets  of  life  com- 
panies, other  than  real  estate,  consist  mainly  of 
credits  and  other  interest  or  dividend  bearing 
securities. 

The  necessity  for  safety  and  reliability  of  life 
insurance  contracts  compels  the  companies  to  invest 
in  securities  of  the  highest  grade,  and  these,  of 
course,  yield  only  low  interest  rates.  The  tax  which 

29 


life  companies  should  pay  on  account  of  such  assets 
may  be  determined  by  the  rate  which  can  be  justly 
and  reasonably  imposed  generally  upon  securities 
of  that  character,  assuming,  as  before  indicated, 
that  no  sufficient  reason  exists  for  giving  life  com- 
panies preferential  consideration. 

TAX  KATE  MUST  BE  LOW. 

Keasons  have  already  been  presented  for  the 
conclusion  that  such  rate  must  be  low. 

Taxation  of  such  assets  at  the  rates  ordinarily 
imposed  upon  general  property  presents  not  only 
the  case  of  full  double  taxation,  but  a  rate  which  is 
in  large  degree  confiscatory. 

The  average  rate  of  taxation  on  general  prop- 
erty in  cities  is  estimated  to  be  not  far  from  1%  per 
cent  on  true  value  of  property  assessed.  The 
highest  grade  of  securities  do  not  average  to  yield 
much,  if  any,  in  excess  of  4%  per  cent.  A  tax  rate 
of  1%  per  cent  upon  face  value  of  such  securities 
would  take  one-third  of  the  income. 

Such  burden  amounts  to  partial  confiscation, 
when  it  is  considered  that  the  security  is  but  rep- 
resentative of  an  interest  in  property  already  taxed 
at  or  near  the  rates  imposed  upon  general  property. 

The  situation  as  affecting  life  companies  may  be 
illustrated  by  taking  a  concrete  instance : 

The  assets  of  The  Northwestern  Mutual  Life 
Insurance  Company,  of  Wisconsin,  excluding  real 
estate,  amounted  on  January  1,  1911,  to  $271,595,- 
259.87. 

30 


The  proportion  of  such  assets  equitably  belong- 
ing to  Wisconsin  policyholders  is  about  7  1/3  per 
cent,  or  |19,918,796.35* 

The  company's  annual  income  on  this  amount 
at  the  average  rate  of  its  income  on  all  its  assets 
for  1910  (4.557  per  cent)  is  $907,699.55. 

An  ad  valorem  tax  on  the  Wisconsin  portion  of 
such  assets  at  the  average  tax  rate  in  Wisconsin 
for  the  year  1910  as  computed  on  estimated  true 
value  of  taxable  general  property — such  rate  being 
.01117968554  (nearly  11.18  mills)— would  amount 
to  $222,685.88.  This  would  equal  24.53  +  per  cent 
of  the  annual  income  from  such  assets.  It  will  per- 
haps be  serviceable  to  note  in  this  connection  that 
the  amount  of  taxes  required  of  the  same  company 
for  the  year  1910  (paid  February  28,  1911)  under 
existing  Wisconsin  law  was  $450,704.78,  which  is 
49.65  +  per  cent  of  such  income. 

The  unjustifiable  excessiveness  of  such  rate  of 
taxation  on  assets  of  this  character  seems  manifest. 

The  practically  universal  failure  of  the  attempt 
to  impose  ordinary  general  property  tax  rates  upon 
credits  is  due  largely,  it  is  believed,  to  the  excessive 
weight  of  the  burden.  The  average  individual  feels 
the  injustice  and  will  evade  if  possible ;  the  average 
assessor  realizes  it  and  makes  little  effort  to  prevent 
the  evasion. 

This  is  shown  in  the  results  of  efforts  in  this 
country  to  secure  revenue  from  credits  and  kindred 


*Ascertained  by  proportion  of  insurance  in  force  on 
lives  of  Wisconsin  residents  ($79,227,755)  to  the  company's 
total  insurance  in  force  January  1,  1911  ($1,080,139,708). 

31 


intangible  assets — evidences  of  interests  in  tangible 
property  otherwise  taxed — by  reducing  the  rate  to 
so  low  a  figure  as  to  take  away  any  substantial 
justification  for  evasion.  Such  results  are  highly 
instructive. 

In  the  city  of  Baltimore,  about  1896,  the  local 
rate  on  credits  was  reduced  to  three  mills  on  the 
dollar.  To  this  was  added  a  varying  state  rate 
sometimes  as  great  as  1.7  mills,  making  a  total 
rate  of  between  four  and  five  mills — a  fairly  stiff 
rate  for  that  sort  of  assets.  The  result  was  that 
the  amount  of  such  assets  listed  for  taxation  in- 
creased from  about  $6,000,000  under  the  old  regime 
of  attempted  full  rate  taxation  to  above  $150,- 
000,000  some  twelve  years  later. 

In  Connecticut  the  rate  is  reduced  to  four  mills 
and  in  Pennsylvania  it  is  also  four  mills  on  the 
dollar.  In  both  instances  substantial  revenue  is 
produced,  although  it  is  not  doubted  that  some 
evasion  is  still  practiced,  accurate  information  on 
that  point  being,  of  course,  impossible. 

PEOPER    TAX    KATE. 

The  low  rates  just  referred  to  afford  very  strong 
light  on  the  question  of  what  is  the  proper  rate  to 
be  imposed  upon  such  assets,  whether  in  the  hands 
of  life  insurance  companies  or  others. 

Additional  light  is  gained  from  the  practice  pre- 
vailing in  those  states  which  undertake  to  tax 
savings  banks  and  the  deposits  therein  by  a  different 
rate  than  that  imposed  under  the  general  property 
tax. 

32 


It  has  been  impracticable  to  ascertain  such  rates 
so  as  to  state  them  precisely  by  averages  or  other- 
wise owing,  in  part,  to  the  great  number  and 
variety  of  exemptions  and  exceptions;  but  enough 
has  been  learned  to  render  it  fairly  safe  to  say  that 
such  rates  average  not  higher,  probably  lower,  than 
the  rates  imposed  upon  general  credits  in  Baltimore, 
Connecticut  and  Pennsylvania.  In  Connecticut  the 
rate  on  savings  deposits  is  2%  mills,  and  this  is 
probably  not  far  from  the  prevailing  rate  elsewhere. 

More  instructive,  perhaps,  are  the  rates  imposed 
where  substantial  income  taxes  prevail.  Income 
taxes  are  not  generally  relied  upon  as  the  sole  or 
chief  source  of  state  and  local  municipal  revenues, 
but  are  ordinarily  supplemental  to  other  forms  of 
taxation.  Speaking  broadly,  they  are  imposed  in 
part  upon  incomes  derived  from  property  otherwise 
taxed,  much  as  a  tax  upon  credits  is  a  super  tax 
with  reference  to  the  tax  upon  the  tangible  property 
which  the  credits  represent.  Indeed,  income  taxes 
are  precisely  that  in  so  far  as  income  from  credits 
is  subjected  to  the  tax.  Being  in  effect  a  super  tax 
so  far  as  relates  to  credits,  and  also  in  respect  to 
some  other  forms  of  property,  and  being  also  sup- 
plemental to  other  methods  of  taxation,  the  rates  in 
general  are  low  as  compared  with  ordinary  rates 
on  general  property. 

The  British  income  tax  rate  is  perhaps  as  typical 
as  any  except  when  income  taxes  are  the  main 
reliance  for  general  revenue.  That  rate  in  recent 
years  has  been  usually  one  shilling  in  the  pound,  or 
5  per  cent  of  the  income  above  a  moderate  exemp- 

33 


tion  for  the  "minimum  of  subsistence."  Prior  to 
the  Boer  war  it  was  materially  less  than  that,  but 
during  that  war  it  was  somewhat  more. 

While  precise  calculations  are  impracticable,  it 
is  believed  that  a  5  per  cent  income  rate  is  not  far 
from  the  average  prevailing  in  most  income  tax 
countries  except,  as  before  indicated,  where  the 
income  tax  is  a  chief  source  of  revenue. 

KATE  AS  PROPOSED  IN  GENERAL  INCOME 
TAX  BILL. 

The  Commission  has  also  given  consideration  to 
the  pending  bill  for  an  income  tax  in  Wisconsin 
reported  by  a  special  committee  of  the  Legislature 
of  1909.  The  tax  proposed  in  that  bill  will  be 
mainly  supplementary  to  other  taxes  and  in  the 
nature  of  a  surtax  as  to  some  forms  of  property, 
but  is  intended,  however,  to  afford  an  apportion- 
ment of  tax  burdens  more  nearly  in  proportion  to 
ability  than  seems  possible  under  present  laws.  But 
in  respect  to  credits  the  tax  proposed  in  this  bill- 
that  is,  the  income  tax  bill — will  be  in  lieu  of  all 
other  taxes,  as  indeed  it  should  be.  Now,  the  rates 
proposed  in  that  bill,  graduated  from  1  per  cent 
up  to  6  per  cent,  would  not  average  above  5  per  cent 
except  in  the  case  of  very  large  incomes,  and  then 
only  in  respect  to  the  excess  above  the  exemptions 
allowed.  In  the  case  of  the  average  moderate  in- 
come the  average  rate  would  be  materially  less  than 
5  per  cent. 

In  this  connection  it  seems  proper  to  note  that 
the  assets  of  life  companies,  being  held  in  trust 

34 


for  a  multitude  of  policy  holders,  may  justly  be 
considered  as  representing  a  great  number  of  indi- 
vidual estates,  mostly  small  or  only  moderate, 
rather  than  a  single  great  accumulation  belonging 
to  one  person  or  corporation. 

In  the  recent  address  of  Professor  Adams,  al- 
ready mentioned,  it  is  suggested,  indirectly  and 
tentatively  rather  than  otherwise,  that  a  rate  sub- 
stantially equal  to  the  average  rate  which  may  be 
roughly  estimated  from  the  amount  of  revenue  now 
secured  from  credits  under  the  general  property  tax 
laws  may  be  taken  as  approximately  the  rate  to  be 
imposed  on  the  credit  assets  of  life  companies ;  and 
in  that  connection  he  roughly  estimates,  on  data 
partly  assumed,  that  assets  of  this  character  in  the 
hands  of  private  individuals  "on  the  average  are 
taxed  at  the  rate  of  from  six  to  seven  hundreths  of 
1  per  cent,  about  one-fourth  or  one-fifth  as  much  as 
the  similar  property  of  insurance  companies  is  pay- 
ing," the  country  over. 

The  Commission  has  not  felt  warranted,  how- 
ever, in  taking  as  a  guide  or  standard  the  results, 
or  want  of  results,  of  the  attempt  to  tax  credits 
under  the  general  property  laws  in  order  to  deter- 
mine what  life  companies  should  pay  on  that  sort 
of  assets.  If  the  attempted  taxation  of  credits 
under  the  general  property  law  is  a  farce,  as  is 
generally  admitted,  with'  occasional  tragedy  to 
emphasize  the  farce,  would  it  not  be  equally  farcical 
to  employ  the  average  results  of  such  taxation  in  an 
effort  to  establish  a  real  and  a  logically  defensible 
tax  for  life  insurance  companies? 

35 


FIVE  PER  CENT  A  PROPER  RATE. 

As  stated  in  its  special  report,  the  Commission 
concludes  that  5  per  cent  of  the  income  from  assets, 
other  than  real  estate  of  life  companies,  is  the 
proper  standard  or  measure  for  determining  the 
amount  such  companies  should  contribute  to  the 
public  revenues,  in  addition  to  taxes  upon  real 
estate,  applying  such  rate  to  the  income  from  assets 
equitably  belonging  to  policyholders  resident  in  the 
state. 

There  is,  perhaps,  room  for  contention  that, 
in  respect  to  stock  companies,  such  rate  should  not 
be  computed  upon  the  assets  which  represent  cap- 
ital stock,  assuming  that  the  stock  itself  is  taxed 
or  some  tax  is  imposed  upon  stock  companies  on 
account  of  capital.  But  the  capital  invested  in 
such  companies  is  employed  for  profit  much  the 
same  as  capital  employed  in  other  financial  insti- 
tutions. 

If  business  enterprises  in  general  are  to  be  sub- 
jected to  a  supplementary  burden  in  the  form  of  a 
moderate  income  tax,  it  would  appear  equally  justi- 
fiable to  subject  the  income  from  assets  representing 
the  capital  of  stock  life  companies  to  the  corre- 
sponding burden  of  the  low  tax  now  proposed. 

The  legislative  bill  submitted  with  the  Com- 
mission's special  report  does  not  allow  any  deduc- 
tions of  assets  representing  capital  stock  in  com- 
puting the  tax. 

If  such  tax  should  be  made  in  lieu  of  taxes  upon 
the  capital  of  stock  companies  it  would  afford 

36 


such  companies  some  degree  of  immunity  and 
advantage  over  mutual  companies  and  a  much 
lighter  burden  of  taxation  than  is  borne  by  banks, 
trust  companies  and  like  financial  institutions  in 
this  state,  so  far  as  relates  to  the  moneyed  capital 
invested  therein.* 

Of  course,  the  5  per  cent  income  rate  suggested 
is  not  ascertained  by  definite  statistical  or  other 
precise  calculation.  It  is  not  perceived  that  any 
rate  may  be  calculated  arithmetically  from  any  data 
known  to  be  available. 

If  it  were  sought  to  secure  an  assumed  total  of 
revenue  from  life  companies,  the  ascertainment  of  a 
rate  or  rates  to  produce  it  would  be  a  simple  and 
definite  matter  of  computation,  but  the  problem, 
as  understood  by  the  Commission,  is  to  ascertain 
not  what  such  companies  shall  or  can  be  forced  to 
pay,  but  what  amount  of  tax  can  be  reasonably  and 
justly  imposed.  This  involves  a  study  of  ability, 
of  the  character  and  functions  of  the  assets  out  of 
which  ability  grows  and  the  rates  by  which  ability 
may  be  measured  in  practical  administration. 

The  nature  of  the  inquiry  is  such  that  the 
answer  to  be  returned  must  be  quite  largely  a 
matter  of  human  judgment. 

It  is  not  claimed  that  the  judgment  exercised 
in  this  instance  is  infallible,  but  there  has  been 


*Where,  by  charter  provisions  or  otherwise,  there  are 
limitations  upon  the  amount  of  profits  which  the  share 
holders  of  stock  companies  may  receive  on  account  of  the 
capital  employed,  the  case  would  be  different  from  that 
of  other  financial  institutions  where  no  limitation  is  im- 
posed, and  such  difference  might  be  sufficient  to  warrant 
some  difference  in  treatment  in  tax  legislation. 

37 


earnest  effort  to  acquire  as  much  of  the  knowledge 
requisite  to  intelligent  judgment  as  possible  within 
the  time  thus  far  available. 

AS    TO   PREMIUM    RECEIPT    BASIS   OF 
TAXATION. 

As  is  well  known,  the  prevailing  practice  in  the 
American  states  is  to  use  premium  receipts  as  the 
basis  for  determining  the  amount  of  tax  which  life 
companies  shall  be  required  to  pay,  though  there 
is  great  variation  in  respect  to  the  rate  imposed  on 
such  receipts. 

This  prevailing  practice  is  largely  due  to  the 
fact  that  such  method  is  simple,  certain  and  inex- 
pensive in  administration. 

This  fact,  and  the  prevalence  of  the  method, 
doubtless  had  much  weight  with  the  committee  of 
the  International  Tax  Association  in  making  its 
recommendation  of  that  method  to  the  Conference 
of  the  Association  in  1910,  already  mentioned. 

In  deference  to  that  practice  and  to  such  recom- 
mendation the  Commission  was  at  first  disposed  to 
approve  such  method  after  first  ascertaining  the 
amount  of  revenue  which  should  accrue  from  a 
tax  worked  out  by  the  test  and  standard  of  a  mod- 
erate rate  upon  income. 

It  was  soon  observed,  however,  that  premium 
receipts  of  the  various  companies  doing  business  in 
Wisconsin  bear  no  uniform  relation  to  the  assets 
of  those  companies  respectively.  The  companies 
carrying  large  amounts  of  so-called  industrial  insur- 
ance collect  much  larger  amounts  in  premiums  in 

38 


proportion  to  reserve  assets  required  to  meet  the 
obligations  of  those  contracts  than  the  premium 
receipts  needful  for  the  ordinary  type  of  policy; 
and  the  companies  which  have  a  large  proportion 
of  paid  up  or  well  matured  policies  in  force  collect, 
of  course,  a  smaller  amount  of  premium  receipts 
in  proportion  to  reserve  assets  than  those  having  a 
less  proportion  of  such  policies. 

This  want  of  uniform  relation  between  premium 
receipts  and  assets  will  be  shown  more  fully  in 
statistical  tables  to  accompany  the  general  report 
of  the  Tax  Commission;  and  a  well  settled  convic- 
tion that  income  producing  assets  constitute  a  far 
more  just  and  accurate  test  or  measure  of  ability 
to  pay  than  premium  receipts  has  led  the  Commis- 
sion to  abandon  the  idea  of  premium  receipts  as  the 
basis  for  the  tax  on  life  companies,  and  to  recom- 
mend, as  indicated  in  the  report  and  accompanying 
bill,  that  the  tax  be  determined  by  direct  application 
of  the  proposed  5  per  cent  rate  to  income  from 
assets. 

This  would  be  an  income  tax  in  effect,  but  in 
order  to  reach  and  tax  foreign  companies  the  tax 
should  be  in  form  an  excise  or  charge  for  the  privi- 
lege of  conducting  life  insurance  in  the  state,  and 
it  is  so  made  in  the  bill  mentioned. 

RECIPKOCAL  OR  RETALIATORY  LAWS. 

The  proposition  stated  in  paragraphs  8  to  15, 
inclusive,  of  the  Commission's  special  report  deal 
primarily  with  the  situation  resulting  from  the  re- 
taliatory laws  of  other  states.  It  is  not  believed 

39 


that  these  require  very  much  elucidation  or  ampli- 
fication. The  general  purpose  and  tenor  of  such 
laws  may  be  briefly  stated. 

New  York,  for  example,  enacts  that  companies 
of  that  state  and  of  other  states  shall  pay  a  tax  of 
1  per  cent  on  premium  receipts  in  that  state.  This 
is  the  regular  tax.  It  enacts  further  that  if  any 
other  state  shall  impose  a  higher  tax  on  New  York 
companies  than  the  regular  tax  in  New  York,  the 
companies  of  such  other  state  shall  pay  the  same 
higher  tax  in  New  York.  This  is  the  retaliatory 
feature.  Its  purpose  is  to  prevent  as  much  as  pos- 
sible the  excessive  taxation  in  other  states  of  the 
companies  of  the  state  enacting  such  law.  In  some 
states  no  "regular"  tax  is  imposed,  but  by  a  "recip- 
rocal" law  each  company  of  another  state  is  re- 
quired to  pay  a  tax  proportionately  equal  to  that 
required  in  its  home  state. 

Ketaliatory  and  reciprocal  laws  of  the  char- 
acter just  mentioned  are  often  deprecated  and 
their  abolition  advocated.  They  have  legitimately 
served  their  purpose  in  some  instances,  however,  as 
in  the  case  of  excessive  taxation  of  foreign  com- 
panies in  Wisconsin  under  the  act  of  1867,  men- 
tioned in  an  earlier  part  of  this  discussion.  The 
possibility  of  the  repetition  of  such  legislation  is 
probably  sufficient  to  keep  such  retaliatory  laws  in 
force,  and  there  is  little  reason  to  expect  their 
repeal  so  long  as  there  is  such  wide  variance  be- 
tween the  laws  of  the  several  states  in  respect  to 
the  amount  of  taxes  to  be  paid  by  life  companies. 

When,  if  ever,  such  laws  become  substantially 

40 


uniform,  the  retaliatory  laws  will  become  corre- 
spondingly inoperative.  If  their  existence  and 
enforcement  will  tend  to  secure  such  uniformity 
that  fact  would  furnish  an  additional  reason  for 
their  retention. 

A  PLAIN  QUESTION  OP  EIGHT  AND  WRONG. 

While  fiscal  legislation  is  a  dry  subject,  it  often 
involves  questions  of  right  and  wrong,  calling  upon 
the  legislator  for  the  exercise  of  statesmanship  and 
courage  of  the  highest  order. 

In  the  opinion  of  many  citizens  of  the  state,  and 
of  many  people  of  other  states,  Wisconsin  has 
achieved  enviable  distinction  in  the  enactment  of 
laws  designed  to  correct  abuses  and  secure  equality 
of  right  and  obligation  among  her  citizens. 

The  credit  for  such  achievement  is  due  largely 
to  the  moral  fibre  and  manly  courage  of  the  rep- 
resentatives of  the  people  who  have  sat  in  her  leg- 
islative halls. 

Within  recent  years  they  have  dealt  with  the 
taxation  of  various  forms  of  accumulated  capital 
with  a  view  to  establishing  equality  and  justice, 
and  in  the  laws  enacted  great  advancement  was 
made,  it  is  believed,  toward  the  object  sought. 

While  these  enactments  called  for  courage  and 
fidelity  to  duty,  they  made  no  call  upon  legislators 
to  relinquish  accustomed  revenues. 

A  greater  test  is  now  before  you. 

If  the  conclusions  reached  by  the  Commission 
on  the  subject  now  under  consideration  are  approx- 
imately correct,  it  becomes  a  plain  question  of 

41 


right  and  wrong  whether  Wisconsin  shall  continue 
to  exact  from  life  companies  and  the  holders  of 
life  insurance  policies  the  amounts  demanded  under 
present  laws. 

Can  Wisconsin  afford  to  lower  her  standard  of 
righteousness  in  legislation? 

Will  her  legislators  fail  to  uphold  that  standard 
merely  because  it  will  cost  the  loss  of  a  substantial 
amount  of  revenue  from  a  source  from  which  too 
much  has  heretofore  been  exacted? 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 
BERKELEY 


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JUL241957 


AUG  20 


LD  21-100m-ll,'49(B7146sl6)476 


